New ISA limits

Chancellor George Osborne announced that the overall ISA contribution will be upgraded in this new tax year from £11,280 to £11,520. The 2.1% rise means that half this amount (£5,760) can be placed into a tax-free Cash ISA by savers. The full ISA limit can only be invested in Stocks and Shares ISA.

The Junior ISA (JISA) is similar to their ‘senior’ equivalents in that all income and capital gains generated by investments held within them are tax-free. Equally, in common with adult ISAs but distinct from Child Trust Funds, there are no limits on the charging structure, which should, in theory, encourage more providers to enter the market and thus more choice for investors. JISAs do differ from ISAs though in a number of important respects, for example, the annual limit is £3,720.

JISAs also allow switching from cash to shares and vice versa, which is not currently permissible for the senior version. Children will be allowed to hold one cash and one stocks and shares ISA at a time and split the £3,720 limit between the two.

The money cannot be touched until the child reaches 18, but the child can assume management for the trust at 16, should they wish. At 18, the child becomes entitled to the money held within the JISA. If it is not encashed, it will automatically roll into an ISA.